Friday, May 29, 2015

BOOK BIZ - EDC vs. Amazon

Sign at BookExpo America Yesterday. EDC took all
its titles off Amazon and sells only through stores
and home-based sales consultants.
I spoke yesterday with a fellow blogger at BookExpo, the annual book show at the Javits Center in New York that winds up today. I asked him: "How are publishers addressing online competition?"

He shook his head. "Nobody really knows what to do."

Sentiment, however, widely favors the underdogs, the independent book stores like Books of Wonder. Some companies like Ingram are taking positive steps to grow their business by providing thoughtfully constructed services to the "indies" - independent publishers, authors and stores.

Hachette's attempt to fight with Amazon over the pricing of digital books is well known. Amazon retaliated against Hachette by delaying shipments, ending preorders, and making it harder for Hachette titles to pop up as recommended to browsers.

Writers have complained about Amazon's policies.  Amazon has replied that cheaper books will benefit both readers and writers and - through higher sales - publishers.

Meanwhile a smaller company than Hachette, Educational Development Corp. (EDC) in Tulsa, Okla., has taken a more dramatic step against discounting, as told by Aaron Gell in Business Insider last August. By no means the youthful David of the bible story, EDC's 72-year-old CEO, Randall White, in 2012 took all 2,000 of his book titles from Amazon - and other online discounters and big-box stores. He thereby gave up $2 million in annual sales .

His problem was that while Amazon was selling more books, it was discounting them so much that revenues were declining.

The outcome of his experiment is that EDC in 2014 had its best year ever in net revenues. EDC’s stockholders were worried, but since White personally owns 800,000 shares he had a ready answer to their beefs. The stock price (NADAQ: EDUC) fell as low as $2.50 under Amazon's discounting, and has since hit a peak of nearly $6 at the beginning of 2015. It fell back to $4 in April and in the last few days has recovered to $5.

Mary Arnold Toys is one of more than 6,000 retail shops that carry EDC’s books. Many were distressed by the fact that sales were migrating online for the lower prices. The fact that EDC’s books could no longer be purchased on Amazon made it special for parents and their children to come into the toy shop. Sales of EDC books doubled.

Two things make EDC possibly a special case:
  • The company has Nancy Ann Wartman, in Taylor Mill, Ky., leading 7,000 home-based sales consultants who sell through book fairs and home parties. 
  • EDC's publishing division sells to children, who are spending their parents' money and are not very price-sensitive in their selection of books. They are more interested in inspecting the merchandise before purchase. A store where toys and books can be seen and handled is a real service for children and their parents.